Theranos raised $633 million after passing an inspection that didn’t even look at the blood test that made it famous

Elizabeth Holmes, founder and CEO of Theranos, speaking at the Wall Street Journal Digital Live conference at the Montage hotel in Laguna Beach, California, on October 21.
REUTERS/Mike Blake
Another bombshell report from The Wall Street Journal's John Carreyrou questioning the technology of blood-testing company Theranos came to a shocking conclusion about the company's value.

Shortly after passing a critical inspection by the Centers for Medicare and Medicaid in which the agency looked at Theranos' lab instruments, the company raised $633 million from investors. That put the company's valuation at $9 billion, with founder Elizabeth Holmes' stake more than half of that.

But according to the Journal, CMS did not examine the "revolutionary" technology that aims to run its tests on only a finger-prick's worth of blood. Instead, the inspectors only looked at the tests that were run using traditional lab equipment, Carreyrou reports.

David Boies, Theranos' outside legal counsel, told the Journal that CMS chose to do its inspection on the area where the company did most of its tests, i.e.: "the room that processed over 90% of the samples at the time."

Theranos says it is currently only using its proprietary technology on one FDA-approved device, its herpes blood test. The company is running the rest of its 140+ tests on traditional lab equipment. And some Theranos Wellness Centers are not using the finger-prick collection tool at all, according to TechCrunch reporter Sarah Buhr.

That $633 million round was by far Theranos' biggest — before 2014, the company had raised about $100 million, according to company filings.